Home prices falling faster in September

posted at 10:55 am on November 30, 2010 by Ed Morrissey

The housing bubble continues to deflate despite the Obama administration’s efforts to delay the inevitable. Housing prices sank faster in September than in any time this year after seeing them rise briefly in the spring, thanks to short-term interventions by the federal government. As foreclosures start increasing, values will drop even further:

Home prices are falling faster in the nation’s largest cities, and a record number of foreclosures are expected to push prices down further through next year.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 0.7 percent in September from August. Eighteen of the cities recorded monthly price declines.

Cleveland recorded the largest decline. Prices there dropped 3 percent from a month earlier. Prices in San Francisco, Los Angeles and San Diego, which had been showing strength this year, also dropped in September from August.

Interestingly, two metro areas showed gains — Washington DC and Las Vegas. The nation’s capitol hasn’t had the foreclosure issues of other major metropolitan areas, mainly because unemployment has barely made a dent in DC. Las Vegas, on the other hand, has been one of the epicenters of the housing crisis, and its positive report may indicate that the worst of it has passed in Nevada, where unemployment is highest.

That high level of joblessness has been the main problem in the housing market, which is why the gimmicky interventions of the Obama administration have had no effect on the housing markets. All they did was delay the inevitable revaluation of assets in the marketplace after the collapse of the bubble, a process which will continue no matter how many interventions the White House stages. Demand simply isn’t materializing at current prices, which means that assets are still overvalued. Until demand rises, housing prices will continue to fall, pushed hard by cheap foreclosure sales that will make it more difficult for people to sell through normal channels.

The only way to boost demand is to put people back to work — and the only way to do that is to stop spending billions on cheap, gimmicky interventions.

Blowback

Trackbacks/Pings

Comments

I’m seeing this collapse in prices too. I was so frustrated that SoCal has a Great Depression economy but housing bubble prices. Since the end of this summer, I’m seeing listing prices just drop on the get go. Two more months, and it looks like you can get a home just a mile from the beach, whereas before you can’t get closer than Riverside. Check redfin!

The only way to boost demand is to put people back to work — and the only way to do that is to stop spending billions on cheap, gimmicky interventions.

great. I had this idea called “Cash for _________ (insert name of project)”. It’s sure to be a hit. All’s that we have to do is offer to buy up houses for those who want to sell them and give them like a $8K tax credit for a “green house” that you know they wanted anyway, and it’ll be great….!

Instead of extending unemployment, just put the unemployed on social security……oh, wait, draft young people into the military……oh, wait, draft the young people into a civilian construction corp…..wait we did that once, did it work?

If you’re talking about housing, you have to talk about the 2 year shadow inventory of foreclosures: and the huge issue of broken chains of title, mortgage backed securities that weren’t backed by mortgages, and “banks too big to fail” which have already been bailed out needing trillions more to stay afloat.

There is an agent here that sends the current prices once a month.
Our prices were pretty steady (compared to the rest of the country) for quite a while. The latest info sheet though has prices way way down. Based on those prices there is a whole new wave of foreclosures coming here. This administration is so stupid. There is nothing that they can think of that will fix this and they are too stupid to figure that out. Employment is the only solution. Good, old fashioned employment, not windmills and bridges.

That’s true. The banking/mortgage thing is the elephant in the room. One of many.
It makes me wonder that that weasel at Wikileaks is going to release about “a major bank”
I’ll bet I know which bank is the “major bank”.

Instead of extending unemployment, just put the unemployed on social security……oh, wait, draft young people into the military……oh, wait, draft the young people into a civilian construction corp…..wait we did that once, did it work?

I know! Go to war with North Korea, that will fix everything.

How about drafting all the democrats and sending THEM to invade North Korea? ;)

+1 Rebar. Increased employment won’t fix it. Housing was a colossal bubble, particularly in certain areas like CA, FL, NV and AZ. There is no more chance of fixing it than of fixing the dot com bust or tulipmania.

Take a look at an inflation adjusted Case Shiller home price graph. Housing prices are probably about 2/3rds of the way down from the peak to a realistic base level, with another 1/3rd of the drop still to go.

Meanwhile… Regular @ $2.99 in Philly last night… Here it comes guys… Place your bets. How long till the MSM makes a big deal out of rising gas prices?
–
Pick a number… I’m thinking Barry gets a pass until after $4/gal… House prices are old news btw… The bottom is not here yet… Everyone knows it… And Barry gets a pass…
–
The shouts for him to resign should be growing from all corners, yet his defenders still act as if ‘hope & change’ just need to come faster.
–

Exactly correct. Many people are waiting to buy, like myself, because we know prices will keep coming down. There won’t be a major appreciation for decades. Thus, you don’t want to get underwater or buy a house you’re not in love with. FL won’t see bottom until 2012.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 0.7 percent in September from August. Eighteen of the cities recorded monthly price declines.
I take it that percentage is not annualized. Is that a 8.4% annualized drop, or am I reading that wrong?

forest on November 30, 2010 at 11:20 AM

Not annualized, but the year-over-year change for the top twenty markets was positive.

This doesn’t stop our Towns and Cities from basing our property taxes on the fictitious (and incredibly over inflated) prices from 2007 though does it???
It’s immoral that these thieves created the housing bubble (and yet Bwarney Fwank still got re-elected!!!) which blew our home “values” through the roof, and now after the market has STARTED to correct itself, are continuing to tax us on those same fictitious “values”!
I know some people who saw their taxes go up 30% in ONE SHOT in 2007/2008 and who now are paying taxes on a value that is AT LEAST 25% over what they could possibly expect to sell at – IF they could even find a buyer!
Oh, but that won’t stop Obozo and Co. from trying to figure out even more ways to screw us! Oh no. Now we’re hearing whispers of ending the home interest tax credits and other things….. Just keep taking the incentive out of working for a living “Representatives”….. sooner or later you’ll create your “Socialist Utopia”….. A$@^!*S.

Not annualized, but the year-over-year change for the top twenty markets was positive.

Jimbo3 on November 30, 2010 at 11:48 AM

So prices are still up since the beginning of the year, but if for some reason they wanted this month’s numbers to look especially bad, it could be reported as a 8.4% annualized decrease in housing prices for the month of September. It’s interesting to me how statistics are presented. Like GDP quarterly growth is always annualized which might make it appear to be 4X larger than it actually is to someone who is not really paying attention (3% annualized growth for 2nd quarter, as opposed to .75% actual growth for the quarter). But this bad news about housing prices was presented as a straight percentage for one month only, which is how it should be reported, but just sayin’, these darn stats can deceive people.

Banks hold a large inventory of foreclosed homes, both on and off the books. The latter is referred to as “shadow inventory.”

They’ve been holding these homes in the hopes the values would increase to what is owed on them, but that’s not gonna happen. Also the banks have a limited window to deal with the inventory as the market is cratering.

I read that many of the homes the banks hold are abandoned, filled with homeless squatters or vandalized, all of which y’know increases the value even more…

How many unemployed folks simply flipped off the banks and walked away, I wonder?

I’ve been keeping track of a few houses for sale. One started out at $649K, sold about a month ago for $267K after being for sale for 2 years. No that is not a typo, it sold for a little over 1/3 the original asking price. Another one I have my eye on started out at $1M even, it is now down to $719K. They keep dropping the price by $20-30K every few weeks. A third, started at $799K, down to $475K.

All 3 of these houses are brand new custom built houses. Builders went bust, now owned by banks. When the $1M hits $500K, I will make an offer for $400K and see what happens.

While I know you like to spin everything in favor of Obama, you’re a smart guy and you know you’re full of BS on this one. Annualized doesn’t mean much in terms of house prices. What counts is the delta in the most recent time period.

Say a house was $500K a year ago today. It went to $600K in May thanks to the $8K funny money Obama was handing out. Now it’s down to $505K. Yeah, sure YOY it is worth more. But in reality the fact that it fell from 600 to 500 in the past 6 months, means a whole lot more than the fact it’s up 5k over the past year.

Any home older that 4 years in foreclosure should be razed. The resulting lot then put up for auction. This solves several problems:

1. Houses don’t remain unoccupied for a long period of time and become sources of neighborhood blight.

2. The resulting sale does not go against the “median home price” and therefore does not further depress home values in the surrounding neighborhood.

3. It reduces the inventory of homes on the market creating support under home prices.

4. Someone buying such a lot is planning to build on it. When they do, this will provide an increase in construction and local jobs. In the meantime, the lot holds its value better than an unoccupied house does.

Home prices are a function of incomes. Someone earns $X per year can afford a house worth $Y. If that $Y goes to $Y+Z then the house becomes unaffordable and is not sold.

That’s the key point that so many people miss. Keeping prices artificially high by whatever means – including razing homes to reduce demand – just keeps people from buying.

The only solution is to do nothing. Let the free market determine the prices. Once that happens, people will buy the 10 year old foreclosures for pennies on the dollar and raze them to clear out lots and build more sustainable housing instead. We don’t need the govt doing this.

While I know you like to spin everything in favor of Obama, you’re a smart guy and you know you’re full of BS on this one. Annualized doesn’t mean much in terms of house prices. What counts is the delta in the most recent time period.

Say a house was $500K a year ago today. It went to $600K in May thanks to the $8K funny money Obama was handing out. Now it’s down to $505K. Yeah, sure YOY it is worth more. But in reality the fact that it fell from 600 to 500 in the past 6 months, means a whole lot more than the fact it’s up 5k over the past year.

angryed on November 30, 2010 at 12:28 PM

These numbers aren’t seasonally adjusted (as far as I can tell). People often want to move into a new house before school starts for their kids, so there’s a natural tendency for sales in September to be down compared to August. In two of the last four years, the decline in the 20 city index was 2 or 3 percent between those two months. (In the other two years, that index was essentially flat between the months).

So you’d raise any house not built in 2000 or later? That doesn’t make any sense to me because houses built in the 1990s don’t generally need much work (other than some cosmetic stuff) to get them to be generally equivalent to new houses. It would make more sense to get rid of houses 30 or so years old.

Sales volume is higher in the summer so volume is adjusted seasonally when comparing MOM. But pricing is a steady function that is not seasonally adjusted. The value of any given house is not higher in March vs. October.

This discussion is not about sales volume lower in Sept vs. Aug. It’s about price being lower in Sept vs. Aug.

Big deal. You guys keep arguing over foreclosures…. so what?? What % of the overall market is that? 3%? 5%??
Who cares??? What about the other 95% of home owners who were notspeculative buyers, who are getting screwed because of the immoral practice of basing tax off the 5 year rolling average???
THOSE are the ones who need the help – THEY are the ones who did the responsible thing and didn’t just walk away from their contractual obligation just because they went upside down.
Pay attention.

BS. There was plenty of speculation in the bubble, by the so-called responsible home owners. How many times did you hear people brag about how much their house was increasing in value? And those same “victims” were the ones taking out helocs and buying Hummers and trips to Tahiti. After all real estate only goes up right?

Jimbo3 on November 30, 2010 at 1:37 PM
You’re mixing apples and oranges.

Sales volume is higher in the summer so volume is adjusted seasonally when comparing MOM. But pricing is a steady function that is not seasonally adjusted. The value of any given house is not higher in March vs. October.

This discussion is not about sales volume lower in Sept vs. Aug. It’s about price being lower in Sept vs. Aug.

angryed on November 30, 2010 at 1:44 PM

Go back to the S&P Case-Shiller link above and look at the third page of the news release. The home prices are shown as seasonally adjusted and non-seasonally adjusted.

If you’re 12 years into a 20 year mortgage, the principal value of your mortgage should (in a normal environment) be less than 80% of the value of your house. At that point, the lender is usually willing to eliminate the escrow requirement (you may get charged an 1/8 of a point). Homeowners insurance increased about $50/month or so in Texas each of the last several years, so that may explain a bit of the change. But taxes shouldn’t go up $350/month unless some large company or companies in your town have gone out of business and significantly eroded the overall tax base.

My insurance went up $1000 two years ago. I guess the company wanted out of the state. My previous company would not even give me a policy on my new house. So I found a broker who got me a new insurer at rates slightly below what I had originally paid when I bought the house, with the bonus that they have none of the super high hurricane deductibles. I am also refinancing and my appraisal came in well below my expectation, so I am paying 3/8th points more, than I would have, but still saving over $400 a month. I had expected a pretty good drop in value, but not as much as it was.